United States Attorney Freedman Announces First-Ever Settlement of False Claims Act Whistleblower Case Involving Grants for Restaurants and Similar Businesses Struggling During the COVID-19 Pandemic
ALBANY, NEW YORK – Movement Mortgage, LLC, has agreed to pay the United States $23.75 million to resolve allegations that it violated the False Claims Act by failing to comply with material program requirements when it originated and underwrote mortgages insured by the Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA), United States Attorney Carla B. Freedman announced today. Movement Mortgage is headquartered in Indian Land, South Carolina, with loans underwritten across the United States, including in upstate New York.
“Lenders participating in mortgage programs backed by taxpayers must follow rules designed to protect both program integrity and homeowners,” said United States Attorney Freedman. “Today’s settlement holds Movement Mortgage accountable for its past violations, while acknowledging that it has taken steps to strengthen its internal controls to ensure future compliance with FHA and VA requirements.”
Participants in FHA insurance and VA guarantee programs, like Movement Mortgage, have the authority to originate and underwrite mortgages without first having the government review the loans for compliance with the agency’s underwriting and origination requirements. If an FHA insured or VA guaranteed loan defaults, the holder of the loan may submit a claim to the United States for certain losses. Lenders are therefore required to follow FHA and VA rules designed to ensure that only mortgages that meet key credit and underwriting criteria are insured or guaranteed by the government.
The settlement announced today resolves allegations that Movement Mortgage failed to comply with material program rules that require lenders to maintain quality control programs to prevent and correct underwriting deficiencies, self-report any materially deficient loans that they identify, and ensure that the underwriting process is free from conflicts of interest.
As part of the settlement, Movement Mortgage admitted that it certified for FHA mortgage insurance and VA home loan guarantees a material percentage of loans that did not meet applicable requirements and, therefore, were not eligible under those programs, despite inaccurately representing to HUD and the VA that such loans complied with applicable program requirements. Movement Mortgage also acknowledged that HUD and the VA would not have insured or guaranteed the loans but for its submission of false certifications. Movement Mortgage further admitted that it failed to adhere to HUD and the VA’s applicable self-reporting requirements.
The covered conduct stretched back as far as July 2008, including a period of rapid expansion by the company. As Movement Mortgage took significant measures to stop the practices, both before and after being notified of the United States’ investigation, it received credit for doing so in connection with the settlement.
“HUD is committed to protecting public funds by ensuring that lenders follow the rules for origination of FHA-insured mortgages,” said Damon Smith, General Counsel for HUD. “Through this settlement, Movement Mortgage is accepting responsibility for its past actions by fully repaying the FHA insurance fund for its losses on defaulted loans that should not have been issued.”
“The integrity of the FHA loan program is essential to helping hard working citizens realize the American dream of homeownership,” said Special Agent in Charge Mark T. Kaminsky with HUD OIG Office of Investigation. “This case demonstrates HUD OIG’s enduring commitment to working with the Northern District of New York USAO to investigate and hold accountable those who seek to jeopardize this program and the health and stability of our nation’s housing market.”
“VA’s Home Loan Guaranty program provides valuable assistance to our nation’s veterans when purchasing or repairing their homes, and vendors must adhere to critical quality standards in order to maintain the integrity of the program,” said Special Agent in Charge Christopher F. Algieri with the Department of Veterans Affairs Office of Inspector General’s Northeast Field Office. “The VA OIG appreciates the work of the U.S. Attorney’s Office and our law enforcement partners throughout this important investigation.”
This investigation was triggered by a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act, which allow private persons, known as “relators,” to file civil actions on behalf of the government and share in any recovery. The relators in this case, two former employees of Movement Mortgage, will receive a total of $4,037,566 of the settlement proceeds. The case is docketed with the U.S. District Court for the Northern District of New York under number 18-cv-848.
This matter was investigated by the U.S. Attorney’s Office for the Northern District of New York, the Department of Justice’s Civil Division, HUD-OIG, HUD, and VA OIG. The United States was represented by Assistant U.S. Attorney John Hoggan, with significant assistance from Adam E. Cearley, Deputy Assistant General Counsel in HUD’s Office of Program Enforcement.